Slightly off-topic (sorry for that).
I am not 100% convinced about the profitability of liquidity provision.
As I pointed out here, because of the volatility of btc/usd, as a lpc it seems it is very difficult to guarantee being in the black on crypto pairs.
What do you think about that?
I suspect most providers right now are doing it either for fun or because they are making a mistake between daily interest and portfolio return rate and/or because they want to try out or because they are altruistic.
I hope I am wrong in my assessment though.
But I feel this is one of the major issues of Nu right now.
The short and long term investor model helps to cure this concern by paying nbt orders at a flat rate and paired crypto orders at a rate that increases with time. This is more on topic than the burning stuff or B&C, in my opinion.
Yes, I didnât want to say that liquidity operations are not good to provide liquidity but just not the right tool to encourage one side. To be honest, we all still have no clue what a reasonable price is. In the server log on the nu-pool I saw several interest rates below 0.1%/day and actually that is also a number I wanted to get the price to.
However, since there IS nobody willing to provide liquidity right now, and since there is also no organic liquidity, I am totally with you that much higher interest rates must be paid.
This would have somehow to take into account the bitcoin volatilityâŚ
Ideally Nu should cover (=pay back) the losses taken by the lpc in case the lpc loses money because of btc/usd going down.
I agree on that. After more than 6 months from being released, Nu has only 40k of buy side liquidity.
(nupool is contributing greatly to that.)
This is obviously very small and cannot get NuBit very far as a currency for the Internet.
We would need 1000 times that figure I guess, I feel.
I do not feel there is a simple solution to the profitability issue for crypto pairs.
Ideally, LPC should be only paid for taking the risk of exchange default, which implies LPCs should only exist on FIAT pairs.
I am worried about the fact the community does not seem to be aware of this crucial issue, although we have seen @mhps calling for providing liquidity on FIATâs gateways or @woolly_sammoth providing liquidity to bittylicious.
I am imagining somehow that the b&c would help lpcâs profitability by giving them back a portion of the trade fees since Nu and b&c would have a very special relationship enabling them to pass special deals
What is the point of decreasing the liquidity costs from Nu perspective if there are only a few LPCs in the first place (because of the low predictable profitability)?
I expressed my opinion on that several times including in the TLLP operation and donât want to comment any further on that. The nu-pool works very well, indeed. It was the community feedback which brought it in this (relatively) stable state.
The problem is that the money in the pool is mostly shareholder participants, so just increasing the target of the nupool or launching on multiple exchanges wonât be enough. Its fresh money that has to flow into NBT and that ideally should also stay there, otherwise its just ponzi.
The FIAT gateways are still my absolute favorite from the ideas proposed, it was also discussed in the ethereum hangout. It gives a wonderful use to stable currencies.
What you need is a triple bot that matches orders on btc/usd, usd/nbt, and nbt/btc markets.
What Iâm offering should be observed as a payment plan for buying nbt with btc, in my opinion. Jeffrey comes in with btc and wants nbt to park cause he believes in Nubits. So he puts up btc on the liquidity wall. If we assume the btc price is a random walk then he knows less and less about the price with time and his bid gets riskier and riskier, so we pay more and more. Eventually, someone buys his order and he makes a little extra holding on the sell wall until the rest of his order fills. Now that he has the nbt, he goes off to do something else with it, like park or convert to USD or whatever (burn for nsr).
If the buy wall is low, they wonât be able to stay on the buy side long. However, in that case we should have high park rates anyway.
Sure, Iâm down with that. Multiply the growth of the payment rate by some factor relating to the number of times the bitcoin price has shifted recently.
I donât think we should be providing bitcoin insurance. I definately agree that we should be focusing on nbt/fiat pairs, and realizing the intricacies of dealing with a static peg.